A Meditation on Intangibility: The Input Value Problem of Patent Valuation

Abstract

Time is money and money is time, but what is the value of your time? What is the value of a lawful monopoly for twenty years? Over the last several decades, scholars have proposed multifarious theoretical frameworks for patent valuation, but no accepted empirical law has emerged. Further, each proposed patent valuation method has at least one major drawback related to an input value problem. The input value problem is uncertainty or inaccuracy of a given input value used in a patent valuation method. Uncertainty or inaccuracy is either inherent in the method or arises from subjective bias or lack of information of the inputs. Different methods of valuation are used in different contexts, but no method has recognized or proposed solutions to the input value problem. This Comment identifies how the input value problem distorts each of the currently accepted valuation methods. Using experimental data and proposed heuristics, the study then conducts an empirical analysis to develop an empirical formula that addresses the input value problem. The proposed method solves the input value problem by incorporating a market-based weighted median of patent assignments, time-dependent patent costs, qualitative validity and claim analysis, and objective patent value indicators. This Comment adds to the patent valuation literature, and informs scholars and practitioners of a novel method to facilitate better negotiations, investments, and litigation.